20 August 2025

 

Key takeaways:

  • The global share market1 moves higher for the fourth consecutive month.
  • The US tech sector provides positive earnings reports and continues its strong performance.
  • New Zealand shares deliver solid returns for July, up 1.8%.
  • Both the US Federal Reserve and the Reserve Bank of New Zealand held interest rates steady, with markets anticipating potential rate cuts in months to come.

 

Below is an in-depth review of financial markets over July.

Global share markets continued their upward momentum in July, marking the fourth consecutive month of positive gains (in USD terms). Markets were buoyed by a mix of strong corporate earnings and ongoing excitement around the artificial intelligence (AI) theme. The US share market2 was once again a leader, gaining 2.2% over July (all returns are in local currency unless otherwise stated).

Leading into the US June earnings season, analysts had materially revised down their expectations due to a highly uncertain environment. This has helped most companies who have reported to outperform expectations. At the time of writing, the US technology and communication services sectors have delivered strong results, with these sectors gaining 5.2% and 2.4% over July respectively, as Microsoft, Meta and Alphabet, all reported strong results. Companies are continuing to ramp up capital spending to meet growing AI-related demand. The tech rally saw Nvidia, a US computer chip and software manufacturer, become the first company to reach a US$4 trillion market capitalisation.

European shares are also in the middle of their earnings season. While revenue growth has been slightly disappointing, earnings are tracking well ahead of expectations. The European share market3 ended the month of July up 1.0%.

Australian equities4 hit fresh new highs in July, ultimately gaining 2.4% for the month. This saw the year-to-date gain climb to 9%. The Australian market was buoyed by easing inflation data and growing confidence in interest rate cuts. All sectors finished in positive territory except financials, with healthcare gaining 9.0%.

Closer to home, New Zealand’s equity market5 gained 1.8% over July. This marks a gain of 7.7% over the past 3 months. Interest rate-sensitive sectors and previously underperforming stocks helped drive the market forward, with local sentiment taking cues from the US market before being shaped by domestic factors.

The US Federal Reserve (Fed) kept its key interest rate unchanged as widely expected. Amid political pressure and economic uncertainty, the Fed has maintained a “wait-and-see” approach. The 2-year and 10-year Treasury yields ended the month at 3.96% and 4.37%, respectively. The Reserve Bank of New Zealand also left interest rates unchanged, with the Official Cash Rate at 3.25%. Economists and market analysts are anticipating interest rate cuts in coming months as underlying inflation shows further signs of easing.

The differing fortunes of various market indices are illustrated in the chart below.

Returns of selected major markets to 31 July 2025

Note: Returns are in local currency terms.

 

The outlook

A resilient global economy has allowed financial markets to withstand the barrage of headlines and elevated policy uncertainty this year. Our lead investment manager’s (JBWere) base case is that this continues, with investors progressively climbing the proverbial ‘wall of worry’. But there are risks.

Importantly, clarity on the global trade and tariff landscape is slowly emerging. While there are still a few moving parts, the US average effective tariff rate looks as though it will settle around the mid-to-high-teens. This is not as high as ‘Liberation Day’ threats, but still well above levels prevailing for the better part of the past 100 years. There will likely be a growth and inflation impact, with some evidence of this appearing already. However, markets don’t need to believe that there won’t be an impact from tariffs. They just need to believe that there won’t be a sustained impact. Confidence in a still healthy medium-term picture and renewed excitement around secular themes (for example AI), has allowed markets to look through any potential tariff-related economic disruption.

But perhaps in that lies the biggest vulnerability. Anything that begins to challenge that medium-term optimism could cause volatility, particularly growth assets like shares. JBWere believes the US labour market is especially important to watch in this regard, as it is ultimately the gatekeeper between what could be a mild economic slowdown and something deeper and more worrying.

Already this year has had plenty of twists and turns, but JBWere’s approach to portfolio management has not changed. Elevated uncertainty and obvious catalysts for further market volatility just reinforce the need to maintain good investment and portfolio construction discipline. This is the focus within the MAS Schemes, where our active management style allows us to regularly test and adjust conviction levels when deemed necessary. The economic and market landscape is constantly evolving. But through strong diversification and its exposures to high-quality investments, we believe the MAS Schemes are well positioned to weather what could be in store next.

We have useful online tools to help you:

If you decide to change your Fund after reviewing your risk profile or meeting with a MAS Adviser, you can make a switch via the MAS Investor Portal, or alternatively you can complete an investment strategy change request form. There is no fee for switching. Links to the relevant forms are below.     

You can see weekly updates on fund unit prices and returns on our website.

1 As represented by the MSCI All Country World index.
2 As represented by the S&P 500 index.
3 As represented by the Euro Stoxx 600 index.
4 As represented by the S&P/ASX 200 index.
5 As represented by the S&P/NZX 50 index. 

This article is of a general nature and is not a substitute for professional and individually tailored advice. Medical Funds Management Limited, JBWere (NZ) Pty Ltd and Nikko Asset Management New Zealand Limited, their parent companies and associated entities do not guarantee the return of capital or the performance of investment funds. Returns indicated may bear no relation to future performance. The value of investments will fluctuate as the values of underlying assets rise or fall.

MAS is a financial advice provider. Our financial advice disclosure statement is available by visiting mas.co.nz or by calling 0800 800 627.

The Product Disclosure Statement for the MAS KiwiSaver Scheme is available: KiwiSaver – MAS 

The Product Disclosure Statement for the MAS Retirement Savings Scheme is available: Retirement Savings Scheme – MAS

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Medical Funds Management Limited is the issuer and manager of the Schemes.